LNG demand in China is looking weak for this coming winter and throughout 2025, which could spell less long-haul spot business for shipping.
Weak growth in the nation’s property sector was one factor cited by Poten Asia Pacific senior analyst Irwin Yeo in a winter 2024-2025 outlook webinar.
He said government economic stimulus measures will be slow to percolate down and in some cases may prove inadequate.
Yeo also highlighted that the Chinese Lunar New Year holiday will be early next year, beginning at the end of January.
This will mean some factories will shut down in late December and early January, while others that have been overproducing could opt to close in November and simply sell down their stock, he said.
In addition, Yeo said Russian gas supply is ramping up via the Power of Siberia 1 pipeline.
He said: “Barring extremely cold weather and sudden policy shifts, Chinese LNG demand outlook will be bearish at least for spot cargoes and quite possibly through 2025 as well.”
Poten senior analyst, Europe & Africa Steven Swindells said that in Europe market players appear “comfortable” with underground stocks over 95% full, not as much floating storage as last year and no constraints on regasification capacity.
Swindells said the key issues for the region will be around Russia, the upcoming expiry of its pipeline transit deal with Ukraine and the European Commission’s review of Russian LNG.
He said Russian LNG imports into Europe are up at 20% of totals for the region from 15% a year ago.
The analyst said Europe is still going to be heavily influenced by what happens with Russia on both LNG and pipeline gas.
Poten global head of business intelligence Jason Feer said that the LNG markets been quiet overall.
Feer said freight rates have been seen falling very sharply despite the longer-haul voyages needed by the constraints on the Panama and Suez canals.
But he questioned how robust supply chains are and said high prices would hit Europe very hard as it is so dependent on spot purchases of LNG. Similarly he said Asian storage is fairly limited, so any winter spike could hit freight.
Feer added that the with the length in the freight markets, even with a cold snap it would appear that tonnage would be available.
The analysts looked for bright spots in the markets.
Feer mentioned Brazil where droughts have cut hydroelectric power production boosting LNG demand.
Swindells said Egypt’s rising demand has caught many in the markets by surprise with a recent tender for 20 cargoes for fourth-quarter delivery and a possible 15 to 20 more likely needed for the first three months of next year.
He said the country looks like a sustained new buying area in Europe.
Yeo said South East Asia nations such as Thailand, Vietnam and the Philippines remain small markets at present but promising, while others like India, Pakistan and Bangladesh remain price sensitive.
Feer asked the question of what could go wrong or what keeps a gas analyst up at night?
Swindells flagged up events in the Middle East but said the focus is on Russian supplies and any disruptions to LNG production in the US or countries such as Norway or Algeria.
Yeo also mentioned supply outages, particularly those caused by earthquakes or cyclones in the Asia Pacific region. He said a sudden loss of power from plants supplied by nuclear or coal would create demand for replacement LNG.
